Driving value through HR transformation
January 2019 | TALKINGPOINT | LABOUR & EMPLOYMENT
Financier Worldwide Magazine
January 2019 Issue
FW moderates a discussion on driving value through HR transformation between Beth Bovis, Robyn Wright, Neeti Bhardwaj, Shirley Santoso and Kristen Etheredge at A.T. Kearney.
FW: How would you describe the shift in corporate attitudes toward human capital in recent years?
Bovis: In the 2000s, everyone woke up to the idea of human capital as one of the critical assets that a company possesses, and to HR having a seat at the CEO table. And what you saw were some companies which broke away from others – but most of the change was structure and process; it did not really change things for the employee. What we now see is a trend toward employee-centric human capital practices. Not coddling or pampering, but real policies and practices designed to allow employees to bring their best selves and whole selves to work. The result is increased productivity for the employer, some positive impact on historical low job and company loyalty, and a bigger lead in the continued war for talent for top companies.
Wright: Most organisations are learning to evolve with their workforce. They cannot complain about ‘the youth of today’ not being loyal; the era of joining a corporation for life is gone. The marketplace for talent is now established as dynamic. Corporates understand they must work hard to retain their staff with those things that matter more than salary: an inclusive culture, a flexible approach to how, when and where staff work – considering hours, location and longer periods of absence during a career – and an approach that keeps wellbeing in mind. Healthy employees make for more productive outcomes and fiscal prudence, due to higher retention and less sick pay. In some respects, though, we are revisiting a past case of the Quaker era: corporations are re-recognising that family and community should be included in their care circle. This may include, for example, spouses being invited as a ‘thank you’ for tolerating long hours, children engaged in where their parents work or what they do, and picnics for all employees.
FW: Could you outline why human resources (HR) is so important to organisations? What do you see as the main functions of an HR department in today’s business world?
Bovis: HR plays a role at three levels in an organisation and is one of the only functions that can, therefore, have a full view of a company’s potential and performance. At the day-to-day level, HR is on the frontline recruiting, conducting exit interviews and handling employee relations. This gives it a perspective of what is really going on and what a company’s reputation and culture is. At the top of the house, HR is setting the strategy for corporate culture and employee engagement, which can enable high-performing teams and support resulting market performance. Finally, at the leadership level, HR is defining the career paths and development interventions that are propelling current leaders and preparing the pipeline of future leaders. A well-run HR department is the heart and sets the pulse of an organisation, laying the foundation for success.
Santoso: The HR function is very important as the catalyst of change in an organisation. With a business environment that changes at a faster pace, technological disruption and shortened strategy cycles, HR will need to prepare an organisation’s workforce to stay relevant and help the organisation to adapt faster, making the changes necessary to stay competitive. As the future of work changes and skills gaps widen, HR will need to up-skill and re-skill the existing workforce, make learning more accessible, personalised and enjoyable for workers, as well as continue to recruit and retain top talent. HR will also need to help companies to be more agile by changing the operating model, transforming the way of working, improving workers’ productivity, encouraging greater innovation, and promoting a performance culture in the organisation.
FW: How is the emergence of new technologies and analytics helping to transform the HR function? In what areas are you seeing significant impact, such as hiring, onboarding and payroll automation?
Bovis: Technology can be a game-changer for HR, but many companies are missing out. There are many chief human resource officers (CHROs) for whom answering the question ‘How many employees do you have and where do they work?’ can launch days of work for their organisation. Certain software overlay tools can provide relief and value here, allowing for visualisation of not only the basics but also how members of the organisation interact with one another, where and how they spend their time, and provide rapid analysis of things like spans of control. The application of ‘digital’ to HR also can see the use of robotic process automation (RPA) to create 80 percent-plus automation of many core HR shared services processes, and access for employees and managers to self-service tools on their mobile phones. Perhaps most exciting is the promise of analytics and artificial intelligence (AI) to address bias in hiring and promotion processes – a trend which is still emerging.
Bhardwaj: Technology has been steadily revolutionising the HR function over the last few years. Solutions are moving from static HR workflow management to dynamic real-time cloud and mobile-based platforms. Large and mid-size companies are increasingly looking to integrate these solutions in the areas of recruitment, collaboration, learning, wellness and performance management. A recent study from CareerBuilder highlights 70 percent of employers screening candidates on social media before hiring them. Skype interviews are becoming commonplace and emerging technologies such as AI are already making a dent, with solutions that can use facial expressions and word choices to round out candidate profiles. Leading companies are moving from on-boarding to pre-boarding. Royal Bank of Canada (RBC), as an example, has launched an app that helps employees learn about their new job and engage with their team online, thus providing a view into company culture even before the start date. Cloud-based payroll solutions are enabling HR to optimally manage an increasingly global and multi-location workforce. The new world of digital HR is arriving fast, and it is enabling both employers and employees in a completely new way.
FW: Is it becoming increasingly important for HR to monitor the health, happiness and morale of employees, and, ultimately, evaluate an individual’s work/life balance?
Santoso: Our experience is that employee engagement is the HR metric that most accurately predicts performance at the individual and overall level. All of these elements, plus quality of work content and a sense of purpose for one’s work, combine to drive engagement. We see leading CHROs switching their personal metrics from HR cost as a percentage of revenue, or HR full-time equivalent (FTE) per employee, to ones tied to engagement and culture. This means traditional employee engagement surveys need to expand and take on a new meaning – and get shorter and be conducted more frequently to be of use to management. HR needs to be in a position to work with their leaders to understand engagement levels and also bring strategies to address gaps – from individual coaching for leaders to systemic programmes like flexible work arrangements. Ownership resides at the individual manager level day-to-day, and HR is responsible for ensuring that those managers have the right tools to drive engagement.
Etheredge: Respecting the whole individual and encouraging employees to bring their ‘best selves’ and unique gifts to work is an important goal for modern organisations, especially in areas that require critical decision making, creativity and problem solving. Understanding the health, happiness and morale of employees is an element of this respect. Many HR organisations use monitoring tools, such as surveys, to take the ‘pulse’ of employees and create a set of facts around the potentially ‘unsaid’ feelings and ideas that may exist. This type of monitoring is becoming increasingly important as the rate of change in organisations increases. The facts created through these tools provide helpful information as leaders plan change or take action to transform to meet business objectives. However, HR must guard against applying standard metrics for health, happiness, morale or work/life balance, as what makes one employee feel valued, fulfilled and ultimately happy with his or her work, may or may not be the same as a co-worker. It is important to understand how employees feel about their own happiness and morale, and not measure this against a predetermined system.
FW: In what ways can HR transformation help a business achieve its goals, boost talent management and development, and ultimately drive value?
Bovis: Done right, HR transformation should result in three sources of value for a company: lower general and administrative (G&A) costs, higher employee engagement and therefore productivity, and enhanced capability of leaders. Digital interventions like RPA and design thinking applied to HR processes can result in a 30 percent-plus impact on cost structure. Upping employee engagement is tied to upping company performance from the shop floor to the executive suite. Applying advanced analytics in a transformation highlights the bright spots of talent and performance that then can be scaled across an organisation. For one consumer company, this extrapolated to a 40 percent-plus improvement in commercial team performance. Driving engagement deliberately also creates a culture that is more inclusive and therefore creates access to broader and deeper talent pools. HR transformation should be a catalyst for leadership taking on this challenge, but needs to include deliberate interventions to ensure frontline leaders have the skills and tools to sustain a culture of engagement.
Bhardwaj: Disruptive forces are changing most business realities with alarming frequency – and show no sign of slowing. HR has a pivotal role to play in both the transformation process as well as long-term sustainability of the process. As such, HR must transform to stay relevant and add value. HR transformation can enable reduced cost and complexity of transactional HR services, to meet the needs of a diverse and changing workforce. Innovative technologies can automate mundane HR tasks, and transparent technologies can enable savvy employees to access and analyse information. Powerful configurable systems could redefine speed and ease of bringing multiple HR data systems together across companies and geographies – especially during specific events like M&A – thereby reducing time and costs. An increasingly digital HR function can enrich end-to-end talent management with faster recruitment, effective learning modules and targeted engagement. Employee-centric collaborative tools and processes can enable employees who need to work across functions to respond to integrate customer events and innovations. Finally, a digitally-enabled HR function can cater to employee expectations where they expect the same responsiveness and engagement from their employers as they get from consumers.
FW: In a world of increasing rules and regulations, to what extent should compliance factor into HR transformation? What technology solutions are available to assist this aspect?
Bovis: Effective and proactive compliance is ‘table stakes’; you can lose everything by not getting it right. But it is not enough alone to ‘win’. HR transformation needs to put compliance at the centre of the bullseye – as opposed to making it simply an enabler or foundation – to ensure focus is not lost. It means having a culture of compliance, rather than just the rules of compliance permeating the function. Business software platforms have adapted quickly and can help an HR function navigate the complex global rules – but they do not substitute for the mindset of doing what is ‘right’ by the employee and company. Social media tools enable leaders and HR to see what employees are saying, and HR transformations can use them to drive proactive HR engagement. This has moved compliance from ‘file a report with HR’ to HR spotting trends and preventing compliance issues from escalating.
FW: What general advice would you offer to companies on implementing HR transformation? In your experience, what factors are necessary for a successful process?
Bovis: First and foremost, our research shows that if you put cost at the centre of your HR transformation objectives, you are less likely to succeed in getting the broader impacts on engagement, talent and culture. But flip this around, and you are more likely to overachieve on your cost objectives. Rule number one is to put the employee at the centre of the transformation. HR transformations that promise to be ‘world class’ and to hit all benchmarks often disappoint. Rule number two is to make deliberate trade-offs on where you want to be: ‘best in class’, ‘better than peers’ or ‘good enough’? Finally, a successful transformation is not a ‘diet’ that gets you to your target weight; it is a programme that creates lifelong fitness. Rule number three is to architect a transformation that is holistic, links company strategy to HR strategy, and is grounded in strong change management.
Etheredge: Any successful transformation must be focused on a specific, inspirational goal linked to a business objective. Too often, HR transformations are perceived as being done simply for ‘restructuring’ purposes, which is why many do not create the desired results. Instead, successful transformations create a sense of urgency as to why this change is important for the business, the product or the customer – whatever the case may be for that transformation. Once this goal is established, successful transformations need strong leaders who communicate, repeatedly and consistently through words and actions, a picture of what the new ‘normal’ will look like after the transformation, such that employees can coalesce around this vision. These leaders also encourage their teams to embrace the vision and create specific action steps to help them move their daily activities in the new direction. Successful transformations require consistent reinforcement and dedication to the vision.
FW: How do you envisage the HR function evolving in the years ahead? Is it becoming more accepted as a driver of value rather than merely an unavoidable overhead?
Bovis: All the HR transformation levers we have discussed result in a function that has more capacity to spend its time linking company strategy to culture and employee impact. CHROs can become chief engagement officers, owning employee value proposition in greater detail. Leading HR functions will push on architecting jobs and careers with strong purpose of work, creating lifelong learning cultures and establishing career paths that go outside the organisation into suppliers and customer organisations, to create a next generation sense of employee loyalty. HR becomes an ecosystem manager, not a functional manager. Some parts of this exist today, but nowhere is it fully actualised at scale. All this starts by getting the basics right, picking the areas where being best in HR drives strategy and putting the employee first.
Wright: There is still a dichotomy, partly driven by a lag in some executives’ understanding of what a good HR strategy could do for them. If the CEO, or the COO, thinks HR simply makes sure the payroll gets enacted each month, then that is exactly the role HR will continue to play. With start-ups or SMEs, often it is a capacity problem as well – until HR makes sure the payroll happens, or the recruitment machine is in place, it cannot do anything more strategic. But if you have a good leadership board, and you have differentiated your HR department well enough, then the direction of travel is definitely to get strategic value from the talent cycle – from hire to retire. When the HR leadership can devote time to best practice, great things happen and a virtuous circle of investment occurs: marketplace campaigns and hiring strategies bring in great talent, promotion and pay is carefully balanced to compensate and reward the best talent, entry and exits are flexible for extended leaves, and the treatment of employees is seamless and painless. Talent likes that, and it creates more of the glue for the company. Handle retirement for your best at the end of their committed working life, and they will devote productive, effective, learned years to the firm. When value is driven by HR, wonderful things can happen.
Beth Bovis is a partner and the global leader for the Leadership, Change and Organization practice. She is also the partner in charge of social impact. Her consulting focus includes organisational strategy, design and governance, change management, HR excellence, leadership effectiveness and large-scale transformation. She works across industries with a focus on global business models, highly decentralised cultures, and non-profits. She can be contacted on +1 (312) 560 7615 or by email: firstname.lastname@example.org.
Robyn Wright is a partner at A.T. Kearney Middle East LLC with 20 years’ consulting experience. She focuses on operating model and organisational design, including talent, change and people engagement during transformations. She works with leadership on evolving governance to drive the targeted outcomes. She is currently supporting government clients in a country-wide health service transformation. She can be contacted on +971 56 416 1084 or by email: email@example.com.
Neeti Bhardwaj, a principal at A.T. Kearney, is an expert in organisational restructuring and change management. Ms Bhardwaj has extensive experience advising clients on merger integration, managing change during complex transformation, as well as improving SG&A functions. She has led some of the most iconic retail and insurance clients through complex transformations and M&A. Ms Bhardwaj has conducted client assignments in most major regions of the world, including North America, Europe and Asia. She can be contacted on +1(312) 223 6518 or by email: firstname.lastname@example.org.
Shirley Santoso is a seasoned consultant and a partner at A.T. Kearney with significant experience in large-scale transformation programmes for private and government sectors, long-term strategy development, operating model and organisational redesign, HR transformation, Fourth Industrial Revolution (4IR) regional and country strategy, country strategic blueprint and competitiveness studies. She is also the leader of A.T. Kearney’s Leadership, Change and Organization Practice in Asia Pacific. She can be contacted on +62 (21) 2918 2618 or by email: email@example.com.
Kristen Etheredge is a partner at A.T. Kearney. She has over 20 years’ of management consulting experience in organisational transformation including organisation and operating model design, change management, and communications. She has helped improve companies across a wide range of industries including healthcare, consumer goods, retail, high tech, food manufacturing and energy. She can be contacted on +1 (972) 559 1138 or by email: firstname.lastname@example.org.
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